United States District Court, D. Oregon
FOG CAP ACCEPTANCE, INC., and FOG CUTTER CAPITAL GROUP, INC., Plaintiffs,
VERIZON BUSINESS NETWORK SERVICES, INC., VERIZON GLOBAL NETWORKS, INC., MCI COMMUNICATIONS SERVICES, INC., and JOHN DOE, Defendants.
OPINION AND ORDER
PAUL PAPAK, Magistrate Judge.
Plaintiffs Fog Cap Acceptance, Inc. ("FCA"), and Fog Cutter Capital Group, Inc. ("FCCG" and, collectively with FCA, "Fog Cap"), filed this action against Verizon Communications, Inc. ("VCI"), Verizon Business Network Services, Inc. ("VBNS"), an entity identified by Fog Cap as CA, Inc. ("CAT"), and an unidentified corporate subsidiary of VCI fictitiously identified as "John Doe" in the Multnomah County Circuit Court for the State of Oregon on April 22, 2011. On or around April 28, 2011, Fog Cap amended its state-court complaint, and on June 16, 2011, defendant CAT removed Fog Cap's action to this court.
Fog Cap amended its complaint in this court on August 17, 2011, naming as defendants VCI, VBNS, Verizon Global Networks, Inc. ("VGN"), MCI Communications Services, Inc. (formerly known as MCI WorldCom Communications and operating under the assumed business name Verizon Business Services) ("MCI"), CAT, and John Doe. On October 21, 2011, pursuant to the parties' stipulation, I dismissed defendant VCI from this action. Likewise based on the parties' stipulation, I dismissed defendant CAT from this action on October 24, 2011. Fog Cap amended its complaint again on July 27, 2012, and a fourth time on October 19, 2012. By and through its fourth amended complaint, Fog Cap alleged the liability of remaining defendants VBNS, VGN, MCI (collectively with VBNS and VGN, "Verizon"), and Doe for breach of contract, negligence, and violation of bailment. On November 7, 2014, Fog Cap voluntarily dismissed its claims against the Doe entity.
Now before the court are Verizon's motion (# 102) for imposition of sanctions and Verizon's motion (# 108) for summary judgment. I have considered the motions, all of the papers and pleadings on file, and oral argument on behalf of the parties. For the reasons set forth below, Verizon's motion (# 102) for imposition of sanctions is denied as moot, and Verizon's motion (# 108) for summary judgment is granted in its entirety.
I. Motion for Imposition of Sanctions
"A federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliation of relevant evidence." Glover v. BIC Corp., 6 F.3d 1318, 1328 (9th Cir.1993). That is, the district courts enjoy the discretion and authority to impose sanctions based on their inherent power "to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial." Unigard Sec. Ins. Co. v. Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (citations omitted). Sanctions available in connection with spoliation include dismissal of claims, exclusion of evidence, and adverse jury instructions. See id. at 368-370.
II. Motion for Summary Judgment
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A party taking the position that a material fact either "cannot be or is genuinely disputed" must support that position either by citation to specific evidence of record "including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials, " by showing that the evidence of record does not establish either the presence or absence of such a dispute, or by showing that an opposing party is unable to produce sufficient admissible evidence to establish the presence or absence of such a dispute. Fed.R.Civ.P. 56(c). The substantive law governing a claim or defense determines whether a fact is material. See Moreland v. Las Vegas Metro. Police Dep't, 159 F.3d 365, 369 (9th Cir. 1998).
Summary judgment is not proper if material factual issues exist for trial. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 318, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995), cert. denied, 116 S.Ct. 1261 (1996). In evaluating a motion for summary judgment, the district courts of the United States must draw all reasonable inferences in favor of the nonmoving patty, and may neither make credibility determinations nor perform any weighing of the evidence. See, e.g., Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55 (1990); Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000).
I. The Parties
Plaintiff FCA is incorporated under the laws of the State of Delaware, with its principal place of business in California. Plaintiff FCCG is incorporated under the laws of the State of Maryland, with its principal place of business in California. Plaintiffs are principally in the business of providing short-term bridge-financing loans to companies that do not qualify for more traditional financing.
Defendant VBNS is and at all material times was a Delaware corporation with its principal place of business in Virginia. Defendant VBNS is in the business, among others, of hosting networked servers for software technology companies. Defendants MCI and VON are predecessors in interest of VBNS, and no longer maintain separate legal existence from VBNS.
II. The Parties' Dispute
In December 2004, Fog Cap extended the first of a series of loans that would ultimately total in excess of $7.5 million to the Centrisoft Corporation ("Centrisoft"). Centrisoft was at that time a Portland-based startup company developing a software tool to allow users to meter and allocate internet bandwidth from a central hosted location.
In June 2005, Centrisoft entered into a Hosting Agreement and a Reseller Agreement with MCI, each of which contained a provision that it was to be governed by New York law. Pursuant to the Centrisoft/MCI Hosting Agreement, MCI agreed to "host" four Centrisoft servers. Under the terms of the parties' agreement, Centrisoft at all times had unfettered access to the hosted servers and to all data stored thereon, including the ability to download contents therefrom without limitation. The Hosting Agreement provided that MCI would perform "daily and weekly backups" of all of the content stored on Centrisoft's servers, and that it would store and maintain all such backup data "in accordance with MCI's standards for backup data retention" for a period of not less than ninety days, with the express proviso that "in order to be properly backed up, " "[Centrisoft]-created databases [would] require additional setup by [Centrisoft]." By and through the Hosting Agreement, MCI agreed that, in the event of a "failure" of one or more of Centrisoft's hosted servers, MCI would "restore such Device from the most recent backup data." However, MCI did not expressly guarantee that such restoration would be to Centrisoft's satisfaction, but rather expressly made "no warranties, express or implied" regarding its backup services and expressly "disclaim[ed] any and all implied warranties" in connection with its provision of services under the Hosting Agreement. The Hosting Agreement additionally contained a liability limitation provision limiting MCI's potential liability to Centrisoft as follows:
The total liability of MCI to [Centrisoft] in connection with this [Hosting] Agreement, for any and all causes of action and claims, including, without limitation, breach of contract, breach of warranty, negligence, strict liability, misrepresentation and other torts, shall be limited to the lesser of: (a) direct damages proven by [Centrisoft]; or (b) the amount paid by [Centrisoft] to MCI under this [Hosting] [A]greement for the 6 month period prior to accrual of the most recent cause of action. Nothing in this section shall limit MCI's liability: (a) in tort for its willful or intentional misconduct; or (b) for bodily injury or death proximately caused by MCI's negligence; or (c) loss or damage to real property or tangible personal property proximately caused by MCI's negligence.
In addition, the Hosting Agreement expressly provided that:
This [Hosting] Agreement (and any Attachments and other documents incorporated herein by reference) constitutes the entire agreement between the parties with respect to the Services provided under this Agreement and supersedes all other representations, understandings or agreements that are not expressed herein, whether oral or written. Except as otherwise set forth herein, no amendment to this [Hosting] Agreement shall be valid unless signed by [Centrisoft] and accepted by MCI.
Pursuant to the Centrisoft/MCI Reseller Agreement, the parties agreed that MCI would have the non-exclusive right to sell Centrisoft's software product and related services (including installation, technical support, maintenance, implementation, configuration, integration, development, and other related services, all such services to be performed by Centrisoft) to interested customers. The agreement provided that in the event either party disclosed confidential information related to the agreement or in the course of the performance of the agreement to the other party (where confidential information is defined as information "that should reasonably have been understood" by the receiving party "to be proprietary and confidential" to the disclosing party), the receiving party would be obliged either to return or destroy all such information "promptly upon the earlier of" either the disclosing party's written request or the termination of the agreement. The Reseller Agreement additionally contained a two-way "LIMITATION OF ACTIONS AND LIABILITIES" provision set forth in. majuscule letters and bolded font in relevant part as follows:
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER PARTY... SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER, INCLUDING LOST OR ANTICIPATED PROFITS, BASED ON ANY BREACH OR OTHER ACT OR OMISSION ARISING OUT OF, RELATING TO, OR OCCURRING IN CONNECTION WITH, THIS (RESELLER] AGREEMENT. THESE LIMITATIONS SHALL APPLY REGARDLESS OF WHETHER THE LIABILITY ARISES OUT OF BREACH OF CONTRACT, BREACH OF WARRANTY, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR ANY OTHER THEORY. THESE LIMITATIONS SHALL IN ALL CASES BE DEEMED INDEPENDENT OF EACH AND EVERY REMEDY PROVIDED IN THIS AGREEMENT AND ARE INTENDED BY THE PARTIES ...